First Quarter Data: Credit Union Borrowings on the Rise

Data from Callahan’s First Look shows a 2% increase in term borrowings for the first quarter 2004 over year-end 2003. While that number in and of itself is not terribly compelling, when coupled with other data points it could provide some insight into how credit unions are strategically positioning their balance sheets. For example, with a pick up of cash on hand why would term borrowings be increasing? Are credit unions getting ahead of the curve, both figuratively and literally, when it comes to funding their business?

 
 

Data from Callahan’s First Look shows a 2% increase in term borrowings for the first quarter 2004 over year-end 2003. While that number in and of itself is not terribly compelling, when coupled with other data points it could provide some insight into how credit unions are strategically positioning their balance sheets. For example, with a pick up of cash on hand why would term borrowings be increasing? Are credit unions getting ahead of the curve, both figuratively and literally, when it comes to funding their business?

For the first quarter 04, shares are still outpacing loans on an absolute basis. Total shares increased 3.2% vs. a pickup in loans of 1.5%. Lets compare this with what happened last year, share growth of 5.6% vs. loans still at 1.5%. Credit unions could be looking at this differential and projecting a trend, and proactively stepping up their borrowings in the event it continues.

There is clearly an ALM benefit to having term borrowings on the books in a rising interest rate environment. The funding is a hedge, locking in a spread against fixed rate loans and investments and allowing other non-fixed assets to reprice. Credit unions following this strategy will be looking to their corporates and the FHLB to help implement the plan.

 

 

 

May 24, 2004


Comments

 
 
 
  • FORUM has used FHLB funding to manage interest rate risk in our mortgage portfilio for several years. This has been a very successful strategy and allowed for continual growth in loans and assets.
    Anonymous
     
     
     
  • How true.
    Anonymous